Key Takeaways
Monolithic Power Systems is staking its claim as an essential supplier to the artificial intelligence buildout, forecasting revenue growth of 35% for the second quarter after its first-quarter results blew past analyst estimates.
“We view this as another thesis-confirming quarter, as MPS leverages its power silicon expertise and diversified customer base to drive consistent beat-and-raise results,” William Blair analyst Sebastien Naji said in a research note.
The company posted adjusted first-quarter earnings of $5.10 per share on revenue of $804.2 million, a 26% year-over-year increase. The results surpassed Wall Street’s consensus call for $4.90 in earnings and $781.9 million in revenue, led by its enterprise data segment where revenue nearly doubled to $262.8 million.
The performance highlights the critical role of power management chips in delivering stable energy to power-hungry AI servers. In response, Monolithic is now making investments to support $6 billion in annual revenue, a significant increase from its prior target of $4 billion, signaling confidence in sustained demand from the AI sector.
Despite the strong report and guidance, shares slumped 3.1% to $1,565.01 in Friday trading, a move analysts attribute to profit-taking after the stock’s 153% surge over the past 12 months. The primary hurdle for new investors is the stock's price, which now trades at 61.5 times projected 12-month earnings, up from a 33.9-times multiple a year ago.
Analysts at Truist Securities see the premium as warranted. The firm reiterated a Buy rating and lifted its price target to $1,805 from $1,396, based on a 65-times multiple of 2027 earnings. Analyst William Stein pointed out that growth is accelerating and the company’s culture of “unencumbered innovation” is hard to bet against.
Raymond James analyst Melissa Fairbanks echoed the sentiment, boosting her firm's price target to $1,800 from $1,350. The jump in planned capacity investment reflects confidence in the growth potential and ensures Monolithic has the supply to meet demand, Fairbanks said in a note reiterating an Outperform rating.
This article is for informational purposes only and does not constitute investment advice.
